How to calculate employee bonuses

When a person enters a job in a company or public body, it has the duty to the institution to perform the functions for which it is contracted, and the institution has the obligation to grant all the benefits inherent to the employee. Now, how to calculate the bonuses of employees, for this we must analyze the provisions of the Labor Law because it is where the State tells the employer of the company how it should be the calculation of salary and bonuses that mandatorily must receive the worker.

Since the countries belonging to the United Nations (UN), accept international agreements, must establish and enforce all human rights inherent in each of the people residing in the territory of their country.

On the other hand, the UN has its own departments for each type of right, such as the World Labor Organization, which is in charge of discussing issues related to workers’ rights.

On the other hand, the States must legislate on the rights agreed on the workers creating, reforming or modifying from these the Labor Law of their country. In this Law, all the rights of the worker must be established, and the procedure to calculate the salary, bonuses, vacations, utilities, evaluation, trust, among others.

In this way, the employer will be obliged and will not be able to breach the employee’s inherent benefits.

Different types of bonuses within a company

Within a company, there will always be one or more employees who will be distinguished from the others. Achieving this, that one way or another be rewarded for having done their activities correctly during the year. Therefore, below, we will mention the different bonus plans within a company.

Calculation for the holiday bonus

When an employee has an uninterrupted year of work, he/she will be able to make use of his/her regulatory employee vacations. Therefore, at this time the worker will have the right to have a paid work break. However, in most Latin countries, the law establishes that the employer must pay the salary plus a vacation bonus.

To perform the calculation of how much the employer must pay the worker for a vacation bonus, the accountant should review what the law’s articles indicate.

As these laws were created based on international agreements established at the UN, the employer must usually cancel one additional month’s salary as a vacation bonus.

Depending on the policies of the company or public body, they can cancel up to three months of full salary for vacation bonus reasons.

Calculation for the evaluation bonus

The employer, following the provisions of the Labor Law, must cancel the employee performance evaluation bonus, indicating as a minimum to cancel, obligatorily, one month bonus of the amount of salary that the worker receives for that moment.

On the other hand, for its calculation, the employer can establish certain parameters depending on how it comes out in the evaluation.

For example, the worker in the course of a year will be evaluated constantly by his immediate boss, in items such as companionship, responsibility, punctuality, perform the tasks assigned, among others.

At the moment that the immediate supervisor evaluated the employee, if he/she leaves excellent in his / her duties, he/she can be benefited by the company to receive two or three months for reasons of performance evaluation bonus.

On the other hand, if the worker is evaluated regularly or well, the employer will only have to cancel the compulsory evaluation bonus, that is, one month of salary.

Calculation for the profit bonus

Similarly, when the employer must perform the calculation for the bonus for profits or also called end-of-year bonus, it will do so from the total net income that the company generated that year, of this amount a percentage will be established. Receive each employee who is part of the company.

For example, if the B & K drafting company generated an annual income of $100,000,000 and in this company three employees were working, of which the distribution of income is as follows: employee1, 40,000,000, employee2, 30,000.0000 and the employee3, 30,000,000, and it has as a rule that it will pay out of profits fifteen times of the total annual income.

Then its calculation will be done in the following way, 100,000,000 by 15%, which results in $ 15,000,000. Now, the budget that the company has to comply with the cancellation due to profits has already been calculated.

On the other hand, to calculate the amount that each of the workers will receive, a simple mathematical operation must be carried out, now what we will do is divide the company’s budget for profits between the annual income of the workers, that is, $15,000. 000/$100,000,000, this will result in 0.15.

Once this result is obtained, it is only multiplied by the income generated by each employee, that is, to calculate the profits of employee 1, it will multiply 0.15% for $40,000,000, resulting in a profit bonus of $ 6,000. 000, employees 2 and 3 as they generated less income, each one will have a $ 4,500,000 end-of-year bonus.

2 thoughts on “How to calculate employee bonuses”

  1. An employee bonus is pay awarded to an employee in addition to their regular salary or pay rate. In most cases, employees earn bonus pay as an award for excellent work or as an end-of-year reward.

  2. While employers award bonuses for different reasons, there are many different types they offer, including:

    Sign-on bonus
    Holiday bonus
    Team incentives
    Gifts or other incentives


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